Money Centers and Regional Banks Remain Vulnerable

Written by: Richard Suttmeier12/06/12 - 9:49 AM EST

Tickers in this article:
JPM C BAC PNC BBT

NEW YORK ( TheStreet) -- The finance sector is 8.5% overvalued with the banks major regional industry 17.2% undervalued. This is reason enough for investors to like the buy rated banks among the nine that I have been profiling in my analysis of the biggest FDIC-insured financial institutions. However, investors and Wall Street continue to ignore the stress that I found in the banking system in the FDIC Quarterly Banking Profile for the third quarter of 2012.

If you are investing or trading bank stocks you should read my post from Dec. 5 FDIC Reports Positive Banking System Data. Please study the table of data that I put together to explain that while the banking system has made slow but steady progress in unwinding toxic assets, that the level of noncurrent loans remain elevated versus levels at the end of 2007 when the great credit crunch began.

Back on Nov. 1, I wrote Bank Stocks Have Symptoms of QE Fatigue where I profiled the nine stocks I am profiling again today. Despite Wednesday's rebound for the industry seven of the nine stocks are lower today then when I wrote the Nov. 1 story.

Looking at ratings from www.ValuEngine.comtoday versus Nov. 1, only one stock was downgraded.

On Nov. 1 only two of our nine benchmark bank stocks were below their 200-day simple moving averages. Today we find five of nine below their 200-day SMA.

Eight of the nine bank stocks have gains of 20.6% to 81.3% over then last 12 months. None are projected to come close to these performance measures over the next 12 months.

All nine banks stocks are cheap based upon 12 month trailing price-to-earnings ratios between 7.7 and 15.3.

All nine stocks are in the make-up of the 24 bank stocks in the PHLX KBW Banking Index (BKX) .

Chart Courtesy of Thomson/Reuters

The daily chart for the BKX ($48.64) shows that the index representing the nation's biggest banks is trading between its 200-day and 50-day simple moving averages at $47.25 and $49.42. The BKX is well below its post-recession high of $58.81, set during the week of April 23, 2010. A close this week below the five-week modified moving average at 48.82 keeps the weekly chart profile negative indicating risk to the 200-week SMA at $44.99. A weekly close below my quarterly pivot at $47.55 indicates risk to this month's value level at $45.18.

The above table shows data from ValuEngine.com covering nine stocks in the BKX.

Reading the Table

OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.